A guide to invest in property in the UK

No matter what you do in whatever sequence, the first and foremost thing a property investor in the UK will do is to get their finances in place. In this blog, I will show you how to work out if property investment is a realistic dream for you and how to make it happen.

Researching the options for property investment

What are the different types of options you have in the UK to invest in property?

There are multiple ways or strategies investors undertake to fulfil their goal from property investment and which matches their risk-appetite. Someone can decide to buy a house or commercial property directly and let it out, or there are multiple ways to get into investing.

If your investment capital is not big enough for independently buying a hose, you could possibly invest in Real Estate Investment Trusts (REITs).

The major and most used methods are:

  • REITs
  • BTL or Buy-To-Let investments
  • Development or renovation projects
  • Purchase an off-the-plan or New Build property
  • Purchasing property in overseas tourist destinations

I will discuss all these options below. 

The prime aspect to keep in mind is that, where property investment is commonly rewarding, it comes with some elements of risk – which is generally true for any kind of investment.

REITs or Real Estate Investment Trusts

These are investment firms listed on a stock exchange and offer investment funds which only invest in properties.

UK residents sometimes prefer this type of investment when looking to invest in property without handling the brick and mortar on their own. These are easier to get in and exit, as there is no physical property to buy or sell for the investor. Multiple investors put their money in a fund, which owns the property.

A legal entity or trust holds the properties and returns are shared amongst the investors, be it from the rental income generated from the property or from profits made by selling a property in the fund.

The low entry point or low cash investment makes the REIT an affordable option for property investment. However, you have to rely on the fund or trust managers experience and to do their job properly to get you a good return on investment.

There are few other passive investment options available which are also indirect –

  •       Property ISA accounts
  •       Property investment trusts
  •       Buying stocks of listed property companies
  •       Property bonds
  •       Property unit trusts


The other alternatives strategies investors undertake to invest in property are the ones that demand more involvement from the investors, which are listed below.

Buy-to-let investments

The most common of these strategies are called Buy-to-let investments, where you acquire a residential property to let out to one or more households. If the property is rented to one person or household, this is called a single-let and when it is occupied by more than one unrelated person, that is called HMOs or house of multiple occupation.

Property Development projects

You can take up the route of property development which could be more rewarding, however you need to be aware of the potential pitfalls. In this strategy, you generally buy a cheaper property which has a potential to improve or refurbishment. After that you either sell it to a higher price to make profit or leave it to rent for cashflow. Listed below are some pros and cons for property development:


        Making good profit quickly after buying a property in significantly lower value

        You make the property on your own style and choice

        There is a chance of saving development costs if you are in this trade and can do it yourself

        The tax on capital gain is fairly low, standing at 18 percent now.


        If it takes longer time to develop the property, you may fall into the property price fall cycle, so may be unable to rip the profit

        Spending more development cost and labour than expected, then there may not be much profit left for you

        If it takes a long time to sell the property, your costs will increase and you have to pay mortgage or financing costs from your pocket.

It all depends on finding the right property to buy at the right price to invest for development.

Off plan or new build property purchase

This strategy is mostly passive as you pay to the property development company without seeing the finished product. You have nearly no control on how the property will be built. Also, it is risky as the developer could go burst and you might lose your money.

Sometimes there could be issues selling the new build property, as there could be so many exactly like your property available, you won’t get any preference on yours. The rent you charge to your tenant is also dictated by other nearby lookalike properties, so you could get stuck to a lower rent.

You could face issues mortgaging the property if it is in a high rise or tower blocks, as lenders have specific criteria when lending on apartment blocks, so your finance options are going to be less.

However, there are certain benefits of buying new builds. You could often get a good deal and buy it a much cheaper value. By the time the property gets completed, it often takes 2-3 years, the property price may increase significantly, and you could sell to make good profit.

Also, the new builds are covered by a 10 years warranty, like NHBC which provides protection for landlords. Since this is going to be a new house, there is a very less chance of defects and so you save on repair or maintenance costs.

Overseas property investment

It is possible that properties in the UK may not seem interesting for you. There are few places where it could offer better returns on investment than in the UK. Many Brits have a dream of having a holiday home in popular seaside destinations. While this could be a good source of regular income from letting out a holiday home abroad, it comes with many downsides that you need to consider.

Listed below are some pros and cons for investing in properties abroad.


        Popular holiday destinations are mostly booked all year round, except for a few months when weather isn’t great for tourism, like monsoon seasons.

        Holiday rentals are generally let higher than standard residential lets

        You can use your own property for holidays abroad at your favourite destinations without paying higher rental.

        You could potentially buy a low value property with a more commercial value.


        It is possible the location of property may not be attractive for tourists and you end up receiving lower rent than expected and fall behind the mortgage repayments.

        You are responsible for all the maintenance costs

        The return after the actual costs incurred could be fluctuated due to uncertain exchange rates.

        Holidaying every year in the same place

        You may need to pay high fees to the management company and stuff to look after your property

        There could be social or political unrest in a remote country and your property may be inaccessible for a certain period, increased tension for yourself as well as loss of rent due to the situation, whereas you need to continue paying mortgages on that.

Now we look at the expenses for your purchasing and maintaining the property.

Your expenses for acquiring the property for investing in the UK

There are costs that go towards purchasing the property. These include:

  • Legal fees or solicitors’ costs (conveyancing)
  • HMRC Land Registry fees
  • Surveys and various searches (Flooding, environmental searches etc.)
  • Mortgage broker fees
  • Mortgage product fees
  • Stamp Duty 
  • setting up insurance
  • Additional fees to Auction houses, if bought in auction

Budget properly to include all the costs mentioned above, also look up government legislation for new rules that might cost money.

You can use our cashflow calculator to estimate your costs and probable return on investment (ROI).

You can also use our stamp duty calculator here.

So, would you still go ahead with investing in property?

It’s a massive decision.

There is a possibility for you to lose money or make good profit. Also in general, in the longer term the UK has a reputation of property price growth, so considered safe when small time ups and downs can be ignored. However, you should not stretch yourself to buy an investment property and not to fall in love with any specific property. You won’t want to struggle paying the mortgages by overpaying on a beautiful but inflated property.

You should also look at other available investment options, including stocks and shares, ISA and other traditional routes and balance your portfolio along with property.

Also, you need to remember, property is not a ‘get-rich-quick’ investment. House prices in the UK go up and down, so be prepared to keep invested for a longer term to ride out turbulent times. You can buy at low and sell when it goes high.

Your affordability

Find out your cost and expenses and do the numbers right

Calculate your purchasing costs and maintenance costs to see if the investment is returning profit. You can use our cash flow calculator to find your net return and monthly cash flow. This will give you confidence that you can save some money after paying monthly mortgage repayments.

After finding the purchasing costs including deposit for the property (standard buy-to-let investments work in a 75% loan to value of the property), check your finances that you have enough liquid cash available to you to complete the deal. Take advice from a mortgage broker who can validate you can get a mortgage. They usually do a soft credit check and match with potential lenders to get you an Agreement in Principle (AIP) and ensure you can go ahead putting an offer on a property.

Locate the right property

Location and tenants

 You will start your property search considering the amount of investable funds that you can dispense. With that in mind, you start searching locations where property costs are roughly about four times of that investable amount (this is because you will get a mortgage of 75% of the house value).

Once you figure out the locations where properties are available within your budget, start looking at the tenant profile that wish to rent houses. You would ideally look for tenants that can comfortably pay for the rent from their income, this will ensure you won’t have tenants who can default.

If you are thinking of student properties, a town with good schools or University/colleges are good options. If you want professional tenants, find the properties that are in bigger towns or at least close to transport links.

Generally properties close to large offices, good schools and other facilities are sold or rented quickly than others.

You will also select a location where people generally buy property to live, which means you can sell the property easily if you need to do that in the longer run.

Select a property

Often it takes to view more than one house before you lock in on one, this gives an opportunity for you to research the area, neighbourhood and observe property price trends. This also gets you information that you can use to negotiate prices later on.

Get an accepted offer

Once you place an offer, either through an estate agent or directly to the seller, most likely it will be rejected at first place, because you are no way going to offer the asking price. However, having enough knowledge on surrounding property sale will give you an idea of a price that the seller might accept, so it’s better to put a reasonable offer. Normally after a few rounds of bargaining, you get an offer accepted.

Complete the sale

Mortgage arrangement

You would normally check out with a couple of mortgage brokers and get comparison of mortgage options from multiple lenders. You should check which one is most comfortable and profitable for you and accept one of them.

Arrange surveys

You will employ a property conveyancing firm or solicitor to conduct the property sale for you. They will instruct the various surveys and searches for you as dictated by the lender.

You can do additional building surveys for your piece of mind, that the property is of good construction. Conducting a Home Buyers Report or a detailed structural survey could be beneficial for the piece of mind.

Exchange of contracts

This is the first legally binding document that both you and the seller need to sign and exchange. Traditionally you pay a certain agreed percentage of the price and agree to complete the process on a mutually agreed date between you and the seller, which is called completion. Your solicitor will coordinate the whole process for you.

Completion of the sale transaction

This involves transfer of the funds to the seller’s solicitors. You will also start your building insurance from this day and collect your keys.

This involves paying the outstanding deposit to the lender via your solicitor and receiving the keys and necessary paperwork.

Start generating money from your investment

Are you going to sell or rent out the property?

Once you’ve completed any renovation work that needs doing on your property, you’ll need to decide what to do next. Look at whether it’ll be more profitable to sell it straight away, or to rent it out.

You would be completing refurbishments if required and think of what to do with the property. Based on your previous plan, decide whether to sell or let the property out.

You would have planned this while selecting the strategy in the beginning of the journey and work according to the plan. However, the situation might change since you have purchased the property, and if you are well aware of your options, you are good to switch plans.

Whatever the case, after you have completed the necessary renovation/development or refurbishment work put it on sale or work towards letting it out.

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